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Will Supermarkets Go the Way of Bookstores?

Online grocery shopping is growing faster than the bricks-and-mortar format. Can the latter survive?

It used to be you could hit a bookstore wherever you threw a rock. There was B. Dalton's, Doubleday, and Waldenbooks, Barnes & Noble(NYSE:BKS) and Scribner's, Borders and Brentano's. Then came the wave of the megalithic superstores that drove out the smallest booksellers and led to industry consolidation.

B. Dalton, Doubleday, and Scribners all became a part of B&N and disappeared. Borders bought out Waldenbooks where Brentano's become a subsidiary. And then there were two, just B&N and Borders, which battled the rise of a little upstart called Amazon. com(NASDAQ:AMZN) that ended up forever changing how books -- and almost everything else -- would be sold. Borders, as we know, eventually went bankrupt and Barnes & Noble now teeters on the brink.

It's a cautionary tale that's getting played out in other industries, too. Just look at consumer electronics where Sixth Avenue Electronics and Circuit City are no more while Best Buy(NYSE:BBY) struggles to remain relevant, let alone solvent.

Could your local supermarket be the next victim of the e-commerce trend? It may seem far-fetched at the moment, but so did the thought of buying books and big-screen TVs online at one time.

Online sales of groceries are expected to soar at a compounded growth rate of more than 12% annually between now and 2017, while the traditional grocery store will barely inch 0.2% higher, even as their total footprint increases.

A recent survey by market researchers at Willard Bishop suggests that we're going to see an explosion of e-commerce grocery stores such as Amazon, Peapod, and even more traditional supermarkets get into online grocery store sales.

Peapod, which is owned by Stop & Shop parent Ahold, was one of the originators of the concept. For a fee, you can buy your groceries at your local supermarket and have them delivered to your house. It's now also exploring curbside pickup . The so-called "click and collect" is one that is expanding not only in the U.S. but globally as well, and Amazon has been installing lockers in convenience stores and other locations to thwart thieves who follow delivery trucks and steal packages, a concept that could easily be expanded for grocery delivery. Between delivery, click-and-collect, and curbside pick-up, Willard Bishop sees the market for e-commerce shopping doubling over the next five years.

As my colleague Rick Munarriz recently noted, even supermarket titan Wal-Mart(NYSE:WMT) is sufficiently worried about Amazon's presence in grocery shopping that it has been expanding its own distribution and fulfillment center network. You're already able to do some grocery shopping at Wal-Mart's online store, but without access to the same broad assortment of goods that you'll find in store, it might limit the concept's attractiveness.

One grocer that might not have to worry yet about online shopping is Whole Foods Market(NASDAQ:WFM), as the fresh-format concept is expanding at a rate that exceeds even that of e-commerce grocery shopping. Natural and organic food stores are expected to grow at a rate of better than 13% annually between now and 2017, a pace that is underscored by the recent IPO of Sprouts Farmers Market and Fairway Group Holdings earlier this year.

Unless and until traditional and e-commerce grocers refine their operations to make it a seamless experience for the consumer that negates having to still run to the store for fresh foods, expect Whole Foods to continue its dominance and growth. But this could be the first bell tolling the demise of the grocery store as we know it, just as we've seen occur elsewhere. Maybe someone will write a book about it one day.

Author

Rich has been a Fool since 1998 and writing for the site since 2004. After 20 years of patrolling the mean streets of suburbia, he hung up his badge and gun to take up a pen full time.

Having made the streets safe for Truth, Justice and Krispy Kreme donuts, he now patrols the markets looking for companies he can lock up as long-term holdings in a portfolio. So follow me on Facebook and Twitter for the most important industry news in retail and consumer products and other great stories.